Vancouver Real Estate Market Analysis - January 2017

December 15, 2017

I have been monitoring the Vancouver Real Estate Market for a while now. I think it’s important to see what’s happening in Vancouver because that market has been accelerating faster than the Toronto market for a longer period of time – and its overall values are at a higher level than the Toronto market. I believe if there were a significant shift in the market, e.g. a market correction, it would happen in the higher market first. That stated, there are certain market conditions that are similar between Toronto and Vancouver but there are also certain market conditions that are different between the two markets, which are:

The best source of market information on the Vancouver real estate market is provided by the Vancouver Real Estate Board and those statistics are available on the internet. Below are some charts of Vancouver’s sales for 2016.

It’s my conclusion that the market in Vancouver peaked in July 2016 at the exact time the province imposed a 15% tax on foreign buyers. At the time this tax came in, I consulted numerous experts in Vancouver, and the expectation was that the market would decrease by the same amount as the tax of fifteen percent. In the past, we have seen a similar market decline balanced by a tax increase, with the implementation of the HST over a decade ago. In my 32 years of experience, I have never witnessed a real estate cliff where property values decline significant amounts overnight. Usually there is a gradual decline for many reasons. The Vancouver market is reflecting this gradual decline, with values depreciating approximately 1% per month, since the peak of the market in July, for a total decline of 6% by end of December 2016. Interestingly, statistics still show a price increase of approximately 26% for the year 2016. This was similar to Ontario in 1989 when the market drop did not appear until the release of the 1990 statistics.

If the premise is that the market will drop 15% as a result of the tax, then we will continue to see prices drop through the Spring market into the Fall market at a rate of 1% per month. Normally, a consistent factor in the drop of real estate values, is a drop in demand for real estate which we have seen – and a corresponding increase in supply of real estate which we have not seen. Therefore, any deviation in the supply of real estate, either an increase or a decrease, will affect the rate of decline.

If you would like to read similar articles on the Vancouver market, here are a few links you can visit:

Toronto is still appreciating and all the experts believe it will continue to appreciate. Based on the market research I have done, I believe external factors will allow the market to go higher. However, what I can’t see is a sustained rapid increase continuing much longer. Toronto experienced a 24% increase in 2016. Possibly it could handle another 24% increase this year but it is highly unlikely that it could manage a further increase of that magnitude in 2018. The external factors that would allow the market to go higher are:

With respect to interest rates in Canada, it is my expectation that they will increase in 2017. There have been several warnings in the press for Canadians to lock down commitments and variable rates. I believe this increase will be driven by the increase in interest rates in the United States.

My personal conclusions are that Vancouver prices will continue to decline and I’ll be watching to see what the British Columbia Provincial Government does to spin this decline in their favour for the upcoming election. I expect the Toronto (GTA) market will increase for at least the Spring of 2017. With many governmental control policies taking effect, it will be interesting to see if these changes will slow the rate of increase.

Please keep in mind that this analysis is only an opinion and not a prediction.

As a side note, my first listing that sold in 2017 was on the market for 5 days. We had 75 showings, 5 offers and sold for 110% of the asking price – no sign of a slow down at this point. If you would like a further detailed analysis of this report or would like to know how this may affect your moving plans for 2017, please contact me directly at 416-276-3460.